Texas Transportation Department Hits Hurdles in Seeking Financing

Rush hour in Houston. In the last decade, Texas has increasingly relied on debt financing and tolls to expand its highway system.Credit
Michael Stravato for The Texas Tribune

When this year’s first special session concluded dramatically in the Texas Senate last month with an energized crowd shouting to block the passage of a contentious abortion bill, proponents of the measure were not the only ones who were upset.

Among the other bills that died in the intense parliamentary battle was legislation to increase financing for the strapped Texas Department of Transportation.

Gov. Rick Perry has included abortion and transportation financing on the agenda of a second special session. But the leading transportation proposal would only reduce the agency’s financing shortfall, not erase it. Whether or not it passes, the agency’s financial woes are likely to loom larger than ever when lawmakers convene for their next regular legislative session in 2015.

“This is part of that solution; it’s not the whole solution,” said State Senator Robert Nichols, the chairman of the Senate Transportation Committee and the author of Senate Joint Resolution 1. The legislation would require voters to approve amending the State Constitution to allow half the oil and gas severance taxes that traditionally fill the coffers of the Rainy Day Fund to be sent to the state’s highway fund. Thanks to the current shale-drilling boom in Texas, the measure is estimated to steer about $900 million more to the agency a year.

“I’m hoping that we can get this passed this special session so that the citizens can vote on it in November, and when we come back next session, we’ll work on other revenue streams,” said Mr. Nichols, Republican of Jacksonville.

Finding other revenue streams to finance road construction and maintenance was a top legislative goal this year. Yet many lawmakers refused to support proposals that raised taxes or fees, or increased public debt.

State Senator Kevin P. Eltife, Republican of Tyler, said he supported Mr. Nichols’s proposal but worried that the piecemeal approach would make it tougher to find a more sustainable revenue source in 2015.

“I almost believe a crisis in transportation would force us to a better solution,” Mr. Eltife said.

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Most of the state’s transportation financing comes from vehicle registration fees and a 20-cent gas tax. Neither revenue source has kept up with inflation. Over the last decade, Texas has increasingly relied on debt financing and tolls to expand its highway system.

Citing strong population growth and rising costs, officials told lawmakers in January that their agency needed an additional $4 billion a year to maintain current traffic levels. Budget writers found an additional $200 million a year that the agency could use to narrow that gap.

A lack of urgency on the issue stemmed from the major road construction projects under way across the state. Those signs of health will dim after the agency’s bond proceeds dry up in about two years, said James M. Bass, its chief financial officer. Drivers would still see some road construction work in 2016, but the signing of contracts for new projects would slow considerably.

Nonetheless, some lawmakers are already laying the groundwork to address the issue more vigorously in 2015. On Tuesday, the House Appropriations Committee will meet to hear testimony on several transportation financing proposals. The hearing is expected to help promote revenue options that will be on the table in two years, according to people involved.

In the meantime, should Mr. Nichols’s plan draw the support of enough lawmakers this month, voters will be asked to approve it in November. State Representative Joe C. Pickett, an El Paso Democrat, predicted that lawmakers and business groups campaigning for the proposal would promote it without giving the impression that it represented a complete fix.

“I think they’ll do what they can to put a positive spin on it to get it passed but leave the door open to doing more,” he said.

abatheja@texastribune.org

A version of this article appears in print on July 7, 2013, on Page A21 of the National edition with the headline: Transportation Dept. Hits Hurdles in Seeking Financing. Order Reprints|Today's Paper|Subscribe